Does your teenager know how to read a pay stub? Or understand how compound interest works? A growing number of states want to make sure high school students have those skills before they begin making a lifetime of financial decisions after graduation.

Earlier this year, California became the 26th U.S. state to require high school students to take a standalone course in personal finance before graduation.¹ The number of states requiring this course has grown substantially since 2020, when only 8 states required a standalone class before graduation.²

California’s new law will require that high school students take a one-semester course in personal finance.³ Eight states adopted similar requirements in 2023 — West Virginia, Indiana, Minnesota, Connecticut, Louisiana, Oregon, Wisconsin, and Pennsylvania.⁴ 

Although the curriculums vary from state to state, there’s a common emphasis on “real- world” skills that students will use after graduation — taking out a student loan, using a credit card, setting a budget, and knowing how taxes are deducted from a paycheck.⁵

Pennsylvania's law directs school districts to emphasize fundamentals like budgets, credit cards, investing, and insurance.⁶ Wisconsin’s curriculum will cover those topics along with “financial mindset” — how values, emotions, habits, and external influences factor into money decisions.⁷

Pandemic drives literacy push 

The recent surge in financial literacy education requirements is not by happenstance. The Covid-19 pandemic exposed how financially vulnerable many Americans are to income disruption and other economic shocks. High inflation has added to the financial strain, particularly among those with low savings and high amounts of debt.⁸

A recent Empower study reveals more than 1 in 5 (21%) Americans have no savings for emergency event, such as job loss, illness, or big home repair bill. Nearly 2 in 5 (37%) couldn’t afford an emergency expense over $400.

Several studies have shown that Americans of all ages are struggling with financial literacy. A Treasury Department report on financial literacy noted that one-third of adults couldn’t answer at least four of five financial literacy questions on fundamental concepts such as mortgages, interest rates, inflation, and risk.⁹

Financial literacy proponents say required classes at the high-school level can help fill those gaps. Students that take a personal finance course are more likely to have higher credit scores and lower debt delinquency rates as young adults, according to one study.¹⁰

Research by the Brookings Institution also noted a positive correlation between teenage financial literacy and higher asset accumulation and net worth at age 25.¹¹

Unique challenges 

High school students nearing graduation face their own unique challenges. Two top economic stressors are soaring rent prices and student loan debt, which have outpaced personal income gains in recent decades.¹²

Read more: Generation Money: Gen Z’s snapshot

Recent polls have shown strong demand for personal finance courses from teenagers. Students are most interested in generating wealth, saving money, and avoiding debt, according to one survey. But the poll also found critical gaps in students’ understanding of instruments like stocks and bonds or how taxes work.¹³ 

The financial education push in public schools does have its detractors. Some parents view financial education as their domain, not schools. And questions remain whether teachers have the knowledge and resources to add personal finance to their existing duties.¹⁴

Making it happen 

Many states don’t have specific licensing requirements for teaching personal finance. In some states, new classes will be led by teachers from other disciplines, such as math, social studies, business and economics, and family and consumer sciences.¹⁵ 

Funds are being earmarked in some states to make sure that the new laws are implemented properly. California has set aside $1.4 million for teachers to access free training in personal finance and will allow school districts setting up finance courses to apply for state grants from a broader $3.6 billion fund that covers several subject areas.¹⁶ 

There’s also strong interest in enhancing student financial literacy at the federal level. The Federal Deposit Insurance Corporation and other agencies have rolled out resources and educator guides on topics like comparing credit cards, the full costs of car ownership, investment vehicles, and understanding compound interest.¹⁷